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Buying firms 'is way in to social housing'

Companies wanting to break in to social housing should acquire firms, says analyst

COMPANIES looking to break into the lucrative social housing market have been told they will have to buy success.

The value of the sector is put at around £10 billion a year yet just a handful of big players dominate. And to break in, new competitors will have to do what Balfour Beatty did at the end of 2003, when it bought Mansell for £42 million.

Mike Foster, construction analyst at broker KBC Peel Hunt, which organised a conference on social housing in the City of London last week, said: 'For companies to grow organically in this market takes forever.

'It takes a long time from a standing start to make any meaningful profit.The biggest issue is that companies are working in people's homes.

'There are a number of small private companies that might be happy to be acquired and firms could build from there.'

Mr Foster's views were echoed by the chairman of Keepmoat, Dick Watson, one of five firms that won a slice of a £1 billion Decent Homes contract in Sheffield last summer.

As a result, the private contractor is expected to report increased profits this year on the back of a £100 million improvement in turnover to £330 million.

Mr Watson said: 'Clients want a four-year track record and they want to inspect the work you're doing elsewhere.'

The conference was attended by a number of major players in the sector including leading figures at John Morgan, boss of Lovell owner Morgan Sindall, Rok head Garvis Snook and Connaught chief Mark Tincknell.

A business development specialist at Costain, James Rumble, was due to attend but had other commitments.

Costain said last September that it was looking to get into social housing maintenance work.

London Pathfinder deal by end of March

COUNCIL officials in east London are hoping to reach financial close on the fourth PFI Pathfinder housing scheme by the end of next month.

Regenter has been preferred bidder since last year for the work to refurbish 1,100 homes in Canning Town for Newham Borough Council.

The firm is a joint venture company set up last summer by John Laing's PFI arm Equion and social housing management specialist Pinnacle.

The council's housing regeneration and sustainability director Kamal Faizi said this week he hoped to reach financial close on the £60 million deal by the end of the current financial year.

PFI Pathfinder social housing work has been beset by a series of problems since it was launched by the Government in 1999.At the time, bidding costs and the amount of time to close deals were greatly underestimated.

The first Pathfinder project in Manchester was eventually let to Gleeson in 2001 after months of delays.